What’s the difference between a good idea and a bad idea?
If you don’t know, then read on!
When someone in a company proposes a new idea to management, an informal two step process is often followed – usually unconsciously. The first step is a gut-instinct evaluation. The manager looks at the idea, thinks about it and, if she likes it, instigates the second stage which is asking the idea proposer to write up a business case of some kind.
The problem with this technique is that gut instinct is sometimes wrong, all the more so when considering radical ideas. There is a tendency towards conservatism when considering ideas involving radical change. Moreover, as I have stated before in this newsletter, the best ideas often sound daft at first. When an idea sounds daft, a busy manager is all too likely to reject it out of hand.
Preparing a business case, on the other hand is expensive. It takes valuable staff time from the author as well as the people who review it. Of course blowing a few thousand Euro on a business case is nothing compared to blowing a few million on a failed idea. Nevertheless, we would certainly like to improve the odds of each business case being convincing, particularly if there is also a larger pool of tested ideas from which to build business cases
The most effective means of performing an initial analysis of an idea is a criteria based evaluation. A criteria based evaluation is an one in which you determine a few basic criteria that are essential for ascertaining whether or not an idea is likely to work. You then determine how well the idea meets each criterion.
For example, if you are evaluating an idea for a new product, you would probably want to consider criteria such as:
- Can we expect a good profit by adding this product to our line?
- Are the costs of developing the product minimal, for example can we use our existing facilities and resources?
- Does the product complement our existing product line?
And so on. Clearly, you could complete such an initial evaluation of a product idea in just minutes
We like to use a 5×5 criteria system for evaluating ideas. We determine five criteria and rate the idea against each criteria on a scale of zero to five. Zero points means the idea does not meet the criteria at all, while five points means the idea completely meets the criteria. Multiply the total number of points the idea receives by four and the result is a score out of 100 possible points, which is easy to analyze.
In fact, we improve accuracy by allowing some criteria to have higher weightings than others in order to represent their importance. We also allow several people to evaluate an idea, thus providing an even more accurate evaluation.
Jeffrey Baumgartner is the founder of jpb.com, makers of Jenni innovation process management software. He also edits Report 103, a popular eJournal on business innovation. Contact Jeffrey at firstname.lastname@example.org or visit https://www.jpb.com/
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